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It's Not Sub-Prime's Fault

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Debt is a disease no matter how big or small it is...The US is in serious debt and the CB's have no cure for it. I see the U.S dimishing as an economic superpower with the focus shifting moreso to Asia, Europe and the middle east. Debt (Financial leprosy) will eat away at the U.S economy over the coming years until it falls to its knees. We may see one last big bull run possibly turning into a bubble before the bull stops charging and runs out puff, slowing sinking to the ground and falling asleep. Just my 2 cents
 
profithunter said:
Debt is a disease no matter how big or small it is...The US is in serious debt and the CB's have no cure for it. I see the U.S dimishing as an economic superpower with the focus shifting moreso to Asia, Europe and the middle east. Debt (Financial leprosy) will eat away at the U.S economy over the coming years until it falls to its knees. We may see one last big bull run possibly turning into a bubble before the bull stops charging and runs out puff, slowing sinking to the ground and falling asleep. Just my 2 cents
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so what is the best language to speak?
 
I dont think that will be the case the reason the US is the worlds superpower is because it consumes 25% of its oil production and was the worlds largest oil producer for 100 years untill the middle of last century. They have the biggest established and diversified economy on the face of the planet

They will continue been the worlds superpower because they have control of the largest and cheapest oil reserves in the world ! it cost about $1 to get a barrel of oil from the ground in Iraq. We have hit peak oil no matter what way you look at it reserves are declining and if you dont have cheap abundant energy you aren't going to be a superepower.

But every says that russia and china still have plenty of energy reserves but the problem is their whole economy is based on exporting fossil fuels. America is addicted to oil but Saudi's Russia etc are addicted on selling it to generate income. These exporting nations have nothing other than fossil fuel exports to drive their economy so when the fuel runs out or demand deminishes due to cost they will be screwed. Their economies are basically empty shell with very little actual production power or financial investment power. China makes it living from exporting cheap dodgy consumables that really aren't a nesseciaty when it comes down to it.

My opinion is the US has a well established military industrial machine with control of a huge amount of cheap oil they wont loose their superpower status if anything they will become more powerful.
 
KIWIKARLOS said:
...But every says that russia and china still have plenty of energy reserves but the problem is their whole economy is based on exporting fossil fuels. America is addicted to oil but Saudi's Russia etc are addicted on selling it to generate income. These exporting nations have nothing other than fossil fuel exports to drive their economy so when the fuel runs out or demand deminishes due to cost they will be screwed. Their economies are basically empty shell with very little actual production power or financial investment power. China makes it living from exporting cheap dodgy consumables that really aren't a nesseciaty when it comes down to it....
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Gee, sounds a bit like OUR economy based on DIG or PERISH eh? ;)


Cheers,

AJ
 
What an interesting thread!

For those of us who want to understand, you can't go past the conclusion that there are alot of elected and non-elected crooks out there who will, unfortunately, never be brought to account for their actions.

More talk about the foundations of our system is very much welcome. LakeMac had a similar thread somewhere here.

Brad
 
KIWIKARLOS said:
I dont think that will be the case the reason the US is the worlds superpower is because it consumes 25% of its oil production and was the worlds largest oil producer for 100 years untill the middle of last century. They have the biggest established and diversified economy on the face of the planet

My opinion is the US has a well established military industrial machine with control of a huge amount of cheap oil they wont loose their superpower status if anything they will become more powerful.
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While i am bullish short term, when i look long term macro the inner bear in me comes out. ;)

Like others have said, the problem America has is the huge amount of debt it is in. Im not sure of the current figures, but a couple years ago they were going $50mill into debt per hour.

Also look at the foreign investment in America. The Saudis have something like $7 trillion invested, and who knows how much the Chinese have slowly been buying up? Imagine if these countries unwound all that, their economy would come crashing down, and all the military power would not be able to save them. They would not be able to produce anything as no one would sell them anything etc etc.

point is, IMO, their military cannot 'blast' them out of the debt they are in.
 
theasxgorilla said:
It's as good of a reason as any try and acquire dual citizenship IMO. There is bound to be a 'bubble' being blown up somewhere, at any given time :)
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Yeh i love the fact that im a dual citizen. Once i finish my degree's im outta here ;)

I'll be over in Europe for a few lagers ASX.G :)
 
wayneL said:
Holy crap! Just about the entire mod team will be outside OZ!
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Wayne,

Are you guys outside of Australia for lifestyle reasons, or because trading conditions are much more favourable in other countries?

I am off to the UK on boxing day with wife and two year old.

Brad
 
I agree that feeding the monster with easy credit was an irresponsible thing to do. I see the monster as the extraordinary leverage that has been created, hidden by derivatives that are so complex that they have become impossible to value. The fed didn't create the monsters though: financial institutions (and their clever accountants) did. So maybe we should blame the accountants as the bad guys? :p:
 
rub92me said:
I agree that feeding the monster with easy credit was an irresponsible thing to do. I see the monster as the extraordinary leverage that has been created, hidden by derivatives that are so complex that they have become impossible to value. The fed didn't create the monsters though: financial institutions (and their clever accountants) did. So maybe we should blame the accountants as the bad guys? :p:
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I think they are eventually going to have to dedicate an army of Lawyers and have devoted Court Houses to weave through this debacle over the next decade :eek:
 
No country will abandon the US or force it to collapse that would do just as much damage to their economies. Chinas largest trading partner is the US closely followed by EU. Same with japan. Saudis sell most of their oil to the US. Theres are so many countries who's economic fates rest with the US that they will definitly bail them out or inject cash as needed. We have already seen it happening Saudis andd China pumping in dollars, i doubt they are doing it based on it been a good investment if the economy is as screwed as we all know.

I would also argue that the military can and is playing a massive role in securing their economy. Most of the money spent in Iraq simply flows back to the US through dodgy contractors and mercinaries who dont actuall build anything they just write the invoices.
 
wayneL said:
Yes & No, I think we need CBs in the current monetary system (Though a privately owned one like the Fed is not Kosher in my view).

I'm suggesting a completely different course of action. In Austrian theory, recessions are a natural and necessary part of the economic cycle. They clean out malinvestent and a host of other ills, when necessary. However when CBs start pulling levers to avoid recessions, malinvestment continues and exponentially increases as we've seen lately, and attempts are made to prop them up are absolutely toxic.

In two words "MORAL HAZARD".

Those clowns who have taken the most innappropriate risks are now the ones being protected/rewarded by CBs, while the prudent instos/individuals get shafted.

The big problem is that malinvestment has now become so widespread, so indulged in by the masses, that people cannot see it for what it is (e.g. property investors calling for a new Dickensian age of a two tier society {the rotten self centered *****}) People believe that ALL risk should be rewarded, therefore no risk.

In conclusion, CBs should facilitate the free market and stick to there public remit of controlling inflation, but not intervene in the cycle as they are now (Gu'mints do a good enough job of screwing that up all by themselves).
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Thought I would bring this up again as it seems appropriate.

It appears as if the US authorities will do anything to bail out markets, and wrong side participants at any cost.

But how can this work? How on Earth is this going to go on? How can you have any faith in trades, both ways, when interference is rife?

How can you even have a market when you know you will be bailed out on the long side no matter what? And how can you have any confidence in the buy side when you don't know if there is any actual intrinsic value in what you are dealing with? Especially if there is someone behind you forcing a market.

So what is the state of play? Bonds aren't secure. No-one knows what, if any real value is in certain markets. But worthlessness is continuing to be forced on people who did not want, don't want and avoided from having in the first place.

Where to from here?

/rant.
 
chops_a_must said:
Where to from here?

/rant.
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Here is what I would do.

1.) Be greedy and become rich by doing things deliberately to "take wealth" away from the poor and get bailed out by the government when things go sour. Accumulate lots of wealth and ignore the poors.

2.) Protect yourself by accumulating hard assets including precious metals and wait till the storm is over.

3.) Live in a fairy tale and believe in justice and that the world is fair and you wouldn't be "punished" from the greedy capitalists (i.e. No. 1) just because you live as a normal, working middle class.

Yep, it all comes down to a moral issue again. The last option is definitely not for me. I wouldn't let the government or the "manipulators" to take my wealth away just to make them richer during this crisis.

I am definitely considering path 1 because I believe the world is a corrupted place and without wealth and power, there is nothing you can do to help others or even protect yourself or your loved one. Of course, that is something I cannot achieve in time to be of any significances.

So I would protect myself with whatever means I have and don't trust the government. :D

ahhh, such deep talks here.
 
KIWIKARLOS said:
I would also argue that the military can and is playing a massive role in securing their economy. Most of the money spent in Iraq simply flows back to the US through dodgy contractors and mercinaries who dont actuall build anything they just write the invoices.
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Have you read "Confessions of an Economic Hitman" by John Perkins? He makes exactly that point, and details his personal involvement in it.

I'm not sure ease of credit is the sole reason we are in this mess. If easy credit is applied to productive areas of the economy, it encourages innovation & an entrepreneurial spirit. The problem as I see it is the easy credit has been applied almost entirely to unproductive areas of the economy - larger housing & large scale speculation. In these instances, the extra credit has been pointless as a stimulus for real economic growth, and as such the dollar vs productivity ratios have gone out the window.
 
chops_a_must said:
Thought I would bring this up again as it seems appropriate.

It appears as if the US authorities will do anything to bail out markets, and wrong side participants at any cost.

But how can this work? How on Earth is this going to go on? How can you have any faith in trades, both ways, when interference is rife?

How can you even have a market when you know you will be bailed out on the long side no matter what? And how can you have any confidence in the buy side when you don't know if there is any actual intrinsic value in what you are dealing with? Especially if there is someone behind you forcing a market.

So what is the state of play? Bonds aren't secure. No-one knows what, if any real value is in certain markets. But worthlessness is continuing to be forced on people who did not want, don't want and avoided from having in the first place.

Where to from here?

/rant.
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It's part of the reason I went to commodities, to sidestep those factors.

Commodities aren't immune of course, as some markets are interconnected, and through index futures I'm still, ipso facto, totally involved with that nonsense, but less of a factor overall.

But it is hard not to have a sense of outrage at it all, if one tries to be a moral human being.

I try to get a bit zen about it all; detachment blah blah. It works... sometimes.
 
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